News on no deal Brexit for VAT

September 10, 2018

It has been confirmed that the UK VAT system for domestic transactions will continue in the event of the UK leaving the EU with no deal in March 2019.

The government has published a guidance note which confirms some details of what will happen in the event of a ‘no deal’ Brexit. The note confirms that VAT for UK domestic transactions will remain unchanged, but businesses will have to treat imports from EU countries like current third, non-EU countries, which could mean changes to IT systems and reporting processes.

An important, and welcome, clarification is that importers will be able to account for import VAT on their VAT return rather than having to pay up front. This prevents a situation where importers would have been forced to pay VAT before having a chance to sell their goods. Interestingly, this new system will also apply to imports from non-EU countries.

For exporters selling to the EU, a no deal situation would mean distance selling arrangements would no longer apply. This would allow UK businesses to zero rate sales of goods to EU customers. Exporters will also no longer need to complete an EC sales list, but will need to retain evidence of goods leaving the UK. Import duties for EU countries may be due at the border, applied on an individual basis.

The current place of supply rules will remain in place, meaning businesses selling digital products to non-business customers in the EU will still need to pay the VAT due in the relevant member state. However, business won’t be able to use the UK’s Mini One-Stop Shop (MOSS) portal. Instead, businesses will have to register for the VAT MOSS non-Union scheme in an EU Member state – and they can only register after the UK leaves the EU.

The guidance note has been broadly welcomed for providing clarity on the effects of a no deal Brexit. We will be available to help your business prepare and adapt for whatever Brexit will bring as more details are decided.

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